[Paleopsych] Exposing Steve's rhetoric re: Social Security Privatization

[Lynn D. Johnson, Ph.D.]

good research, Steve. Thanks. Did you read those reports, or just paste 
the links?  I can't make heads or tails of the SSA stuff. CBO was much 
clearer.

I read: http://www.cbo.gov/showdoc.cfm?index=6068&sequence=0   
CBO testimony:
Quote: If current spending and tax policies do not change, the aging of 
the baby-boom generation, combined with rising health care costs, will 
cause a historic shift in the United States' fiscal situation. 
Consistently large annual budget deficits would probably lead to an 
ever-growing burden of federal debt held by the public. As the 
government claimed an increasing share of national savings, the private 
sector would have less to invest in creating new business equipment, 
factories, technology, and other capital. That "crowding out" would have 
a corrosive and potentially contractionary effect on the economy. 
Although placing federal fiscal policy on a sustainable path will not be 
easy, the sooner that policymakers act to do so, the less difficult it 
will be to make economic and budgetary adjustments.
End quote

Well, sounds like a problem to me! Shows in Figure 1 the shift into the 
red around 2018. They say 2020.
Quote:To pay full benefits, the Social Security system will rely on 
interest on, and ultimately the redemption of, government bonds held in 
its trust funds. At that point, the Treasury will have to find the money 
to cover those obligations. Policymakers can provide that money in three 
ways: by cutting back other spending in the budget, by raising taxes, or 
by increasing government borrowing.
End quote
You see, Steve, CBO says we have to redeem the IOUs. Where do we get the 
money?  (Republcans and Democrats greedily spent the surplus money. Left 
and Right are equally short-sighted.)

By 2050 we HAVE to cut benefits severely. What do we say to our 
children?  (See Figure 1 and testimony)

Quote:

In the absence of other changes, the redemption of bonds can continue 
until the trust funds are exhausted. In the Social Security trustees' 
projections, that happens in 2042; in CBO's projections, it occurs about 
a decade later, largely because CBO projects higher real 
(inflation-adjusted) interest rates and slightly lower benefits for men 
than the trustees do. Once the trust funds are exhausted, the program 
will no longer have the legal authority to pay full benefits. As a 
result, it will have to reduce payments to beneficiaries to match the 
amount of revenue coming into the system each year. Although there is 
some uncertainty about the size of that reduction, benefits would 
probably have to be cut by 20 percent to 30 percent to match the 
system's available revenue.

The key message is that some form of the program is, in fact, 
sustainable indefinitely. With benefits reduced annually to match 
available revenue (as they will be under current law when the trust 
funds run out), the program can be continued forever. Of course, many 
people may not consider a sudden cut in benefits of 20 percent to 30 
percent to be a desirable policy. In addition, the budgetary demands of 
filling the gap between benefits and dedicated revenues in the years 
before the cut may prove onerous. But the program is sustainable from a 
financing perspective.

What is not sustainable is continuing to provide the present level of 
scheduled benefits (those based on the benefit formulas that exist 
today) given the present financing. Under current formulas, outlays for 
scheduled benefits are projected to exceed available revenues 
indefinitely after about 2020 (see Figure 2 
<http://www.cbo.gov/showdoc.cfm?index=6068&sequence=0#figure2>). That 
gap cannot be sustained without continual--and substantial--injections 
of funds from the rest of the budget.
 End quote

We have a serious problem. Where is the solution? One is private 
accounts. What other model will actually work?

Steve Hovland wrote:

>If you're going to rely on authority, why
>not listen to the people who are really
>knowledgeable about this:
>
>Social Security Trustees:  http://www.ssa.gov/OACT/TR/TR04/index.html
>
>CBO:  http://www.cbo.gov/SocialSecurity.cfm
>
>
>Steve Hovland
>www.stevehovland.net
>
>
>-----Original Message-----
>From:	Lynn D. Johnson, Ph.D. [SMTP:ljohnson at solution-consulting.com]
>Sent:	Saturday, March 05, 2005 5:14 PM
>To:	The new improved paleopsych list
>Subject:	[Paleopsych] Exposing Steve's rhetoric re: Social Security	Privatization
>
>Steve, I will try to address your points. Let's not get angry and lose 
>IQ points.
>
>Steve Hovland wrote:
>
>  
>
>>You are forgetting that the Bushies concede that their
>>proposal does not solve the actuarial problem.
>>
>>    
>>
>Cite a source, please. "Bushies" suggests a unified effort, smacks of a 
>conspiracy. There are many POVs on the SS issue. There is NO "Proposal" 
>but rather a variety of ideas being floated and debated. Bush himself 
>says he welcomes proposals. Bush never lies. (I know blood will shoot 
>from your eyes when you read that, but it seems to be more and more 
>apparent. He says what he means and he means what he says. I have been 
>re-evaluating my views on him lately.)
>
>Quote:
>http://www.teamncpa.org/fastfacts/20050217ff2.htm
>
>Alan Greenspan: If you're going to move to private accounts, which I 
>approve of, I think you have to do it in a cautious, gradual way. All in 
>all, I'm glad that if we are going to move in that direction, we're 
>going to move slowly and test the waters because I think it's a good 
>thing to do over the longer run. And eventually because the 
>pay-as-you-go system in my judgment is going to be very difficult to 
>manage, we are going to need an alternative."
>
>"I would be very careful about very large increases in debt. But I do 
>believe that relatively small increases are not something that would 
>concern me. ... I would say over a trillion is large."
>
>First it is important to remember that Social Security faces an $11 
>trillion debt if reforms are not made. However, the up-front 
>expenditures required to start personal accounts has been estimated at 
>about $2 trillion over the next several decades. How to fund the 
>transition is a central area of debate that has yet to be determined. 
>While borrowing the full amount would constitute a "very large" increase 
>in the debt and would be a concern, as Chairman Greenspan has noted, 
>there are other alternatives. For example:
>
>    * Sen. Lindsay Graham (R-S.C.) has recommended increasing the
>      payroll tax cap from $90,000 to about $150,000, essentially
>      financing the transition with higher payments from wealthier workers.
>    * The NCPA has suggested asking participating workers to invest an
>      extra percent to a percent-and-a-half of their income to help
>      finance the personal accounts. This approach, which would reduce
>      the amount diverted from the payroll tax, is similar to the
>      financing provisions of "Model 3" of the President's 2001
>      Commission to Strengthen Social Security.
>    * Congressman Paul Ryan (R-Wis.) and others would cut back other
>      government spending to free-up money to fund the accounts.
>
>End Quote
>
>  
>
>>What is your source for saying that in 2018 SS 
>>goes into the red?  I don't think the trustees are
>>saying that.
>> 
>>
>>    
>>
>Senator Rick Santorum:
>When President Roosevelt created Social Security, our nation's 
>demographics were considerably different. Life expectancy was much 
>shorter--it was lower than the retirement age at which benefits would 
>begin to be paid. Thus, workers greatly outnumbered Social Security 
>recipients. In 1945, there were 42 workers for every one retiree. In 
>1950, the ratio was 17 to 1, today it is 3 to 1, and when today's 
>workers retire there will be 2 workers supporting each retiree. Social 
>Security is heading for insolvency--the longer we wait to fix the 
>system, the more it will cost. Every year we wait costs an additional 
>$600 billion.
>
>Last year's annual, bipartisan Social Security Trustees report further 
>highlighted the future insolvency of the current Social Security 
>program: they project that if no changes are made, in just thirteen 
>years the system will begin paying out more in benefits than it is 
>taking in as revenue. We owe it to our children and grandchildren to 
>provide for their retirement security as they have provided for current 
>and previous generations.
>
>http://www.freedomworks.org/informed/issues_template.php?issue_id=2194
>
>Steve, note: 13 years, 5 plus 13 = 2018. In the red. And again, there is 
>NOTHING in the trust fund except IOUs. Nothing. That means to redeem the 
>IOUs we have to either raise taxes or cut government spending, both, 
>and/ or raise the retirement age and cut benefits. All very hard 
>choices. Each year the problems get worse.
>
>  
>
>>The Laffer curve is a joke.  It acts as if money taken
>>in taxes is shipped into space.  It is spent, thus
>>increasing the size of the economy by increasing
>>the velocity of money.
>> 
>>
>>    
>>
>"I don't think that word means what you think it means."
>    -- The Princess Bride
>
>You might want to investigate this a little more thoroughly. The Laffer 
>curve is base on the pragmatic fact that government efforts to increase 
>prosperity are by in large a failure. That is because the real sources 
>of prosperity is private business, subject to competition. Taxes are - 
>always - a drain on the economy. The higher they are, the lower the 
>activity in the private sector. Rhetoric won't change that fact.
>See: http://www.pbs.org/wgbh/commandingheights/hitest.html
>
>Huge site, takes a while. You can get the book from your library and 
>study it out for yourself. Look at where Britain was before Maggie 
>Thatcher downsized government. Economists predicted at the time that by 
>2000, Britain's GDP would be lower than Albania's. That is where 
>government attempts to create prosperity get you. If you have a good 
>counter example, I am interested to see it. Note also the current 
>unemployment rates in welfare-state EEU.
>
>For an overall review of the social secutiry problem from a partisan 
>view, see
>http://www.heritage.org/Research/SocialSecurity/bg1827.cfm
>Please note that all the main points are referenced. That means I can 
>look up the supporting data and see if the author has been fair in the 
>citations. That is vital.
>
>I'd like to see something from you, Steve, in the way of research, and 
>less in the way of unsupported statements. I enjoy dialog, but there 
>needs to be some facts behind it. Again, if I am wrong, I certainly want 
>to know about it.
>
>At this point, I am more and more impressed with George Bush. The war is 
>working out much better than I would have thought. Three years ago I 
>said the war was about spreading democracy. I was fearful it wouldn't 
>happen. I was wrong.
>
>His idea about social security shows vision and commitment to 
>leadership, and that means leading people not following them via focus 
>groups. I still am very unhappy with his first term domestically.  We 
>will see.
>Lynn
>
>  
>
>>Steve Hovland
>>www.stevehovland.net
>>
>>
>>-----Original Message-----
>>From:	Lynn D. Johnson, Ph.D. [SMTP:ljohnson at solution-consulting.com]
>>Sent:	Wednesday, March 02, 2005 7:26 PM
>>To:	The new improved paleopsych list
>>Subject:	Re: [Paleopsych] Exposing the Echo Chamber Behind Social Security	Privatization
>>
>>Michael,
>>This is kind of an odd piece. I don't really understand the level of 
>>animus on the topic. It is written in a rather ugly, hateful style, with 
>>no genuine content and lots of logical falacies. There is lots of 
>>guilt-by-association stuff, which is irrelevant to any logical analysis. 
>>There is name-calling and labeling, which are classic cognitive errors. 
>>Us-versus-them, and we are righteous and they are evil. All heat, no 
>>light. What is your intention in publishing it?
>>
>>I actually don't see that there is any reasonable alternative to 
>>privitizing, if we get beyond the logical  errors. The facts are known. 
>>By 2018 the system goes into the red. There will be three workers 
>>supporting each retired drone (I being one of them, presumably).
>>
>>Usual alternatives:
>>   1. Raise taxes: bad for the economy; the Laffer curve is not a joke 
>>(hah! I made that up). Three workers cannot support one drone, even 
>>someone like me who is so very deserving. Medicare and SS will consume 
>>almost all of the federal budget.
>>   2. Raise the retirement age: the most reasonable alternative, but 
>>least palatable to the public. In Europe the trend is to retire in the 
>>50s. That means crushing taxes, which is why the European economy is in 
>>such trouble. Look at the unemployment figures.
>>   3. Inflate the currency - unacceptable.
>>   4. Import more and more foreign workers to compensate for the 
>>plunging population rates. The only countries in the world that are 
>>above shrinkage are third world. We see what has happened in Europe when 
>>we import workers who don't have our best interests at heart.
>>   5. Michael's solution????
>>
>>Facts: There is NO MONEY in the trust account, just IOUs. To pay off the 
>>so-called trust fund, we must raid other government programs and or 
>>raise taxes and cripple the economy. This has been known since the late 
>>1980s and Republicans as well as Democrats conspired to spend the money 
>>and put IOUs into the treasury. What should have happened? Well, I 
>>suppose buying commodities like gold, silver, copper, and so on would 
>>have at least preserved the principal. But instead the money is gone, 
>>spent on pork in both Red and Blue states.
>>   The baby boomers hit retirement age in 3 years and following.
>>   The country cannot support social programs, defense, and drones all 
>>at the same time. What will be done? Europe cut its defense, and at this 
>>point, European military is oxymoronic. The taxes are a huge drain, and 
>>anti-capitalist laws make it suicide to try to start a company.
>>   Social Security is not an insurance company. That was established at 
>>the beginning, in a supreme court decision. Congress can change it at 
>>any time, in any way.
>>   Only by allowing people to OWN their retirement, only by creating an 
>>ownership society where if I die at 64, I can pass my money on to my 
>>children, can we get out of the corner we are in.
>>   I'd like to see a coherent, data-based analysis that leads to any 
>>other solution.
>>Lynn
>>Michael Christopher wrote:
>>
>> 
>>
>>    
>>
>>>Exposing the Echo Chamber Behind Social Security
>>>Privatization
>>>
>>>The Bush administration ventriloquists are out in full
>>>force these days, breathlessly hyping "Personal
>>>Retirement Accounts" as a way to save Social Security
>>>by destroying it. For the average voter, getting a
>>>handle on what the Bush administration is proposing to
>>>do to Social Security is quite a challenge. The dozens
>>>of bobbing heads and clicking fingers, holding forth
>>>on cable news programming and the Internet is enough
>>>to make anyone's head spin. Is that spokesman from the
>>>Alliance for Worker Retirement Security speaking as an
>>>independent economics expert, a civic-minded
>>>individual or as a paid shill from a corporate-funded
>>>front group?
>>>
>>>If you're having trouble keeping track of all the
>>>players, our very own SourceWatch can help. It will
>>>tell you that the Alliance is sponsored by the
>>>National Association of Manufacturers, the U.S.
>>>Chamber of Commerce, and the Business Roundtable,
>>>among other pro-business groups. It shares its
>>>executive director Derrick Max and a number of its
>>>members with the Coalition for the Modernization and
>>>Protection of America's Social Security (COMPASS). In
>>>fact, the Alliance and COMPASS both count as members
>>>of the United Seniors Association, a corporate-funded
>>>lobbying group that recently changed its name to
>>>USANext.
>>>
>>>The New York Times reported Monday that USANext is
>>>launching a campaign "to spend as much as $10 million
>>>on commercials and other tactics assailing AARP, the
>>>powerhouse lobby opposing [Social Security] private
>>>investment accounts." To oversee the operation,
>>>USANext hired Chris LaCivita, recently of the 527
>>>groups Swift Boat Veterans for Truth and Progress for
>>>America and an employee of the DCI Group, a firm
>>>specializing in astroturf with close ties to the Bush
>>>White House. True to its word USANext, ran an ad on
>>>the American Spectator that equates the AARP to the
>>>"spit-on-the-troops/gay marriage lobby," as
>>>TalkingPointsMemo blogger Josh Marshall has been
>>>following.
>>>
>>>Progress for America, after raising $38 million last
>>>year to support Bush's reelection, has also jumped in
>>>to the Social Security privatization game. PFA "has
>>>estimated it will spend $20 million promoting private
>>>accounts. It has run a series of ads on cable
>>>television, including a spot that invokes the legacy
>>>of Democratic President Franklin Roosevelt, who signed
>>>the legislation creating the retirement system," the
>>>Houston Chronicle reported.
>>>
>>>PFA told the Chronicle it will be asking past donors
>>>for money to fund their new campaign. The head of the
>>>prominent investment firm Charles Schwab contributed
>>>$50,000 to the group's political arm in 2004. Schwab
>>>gave $75,000 more to the Club for Growth, which is
>>>also lobbying for Social Security privatization and
>>>expects to spend $10 million lobbying to promote
>>>private accounts. Peter J. Ferrara, an alumnus of the
>>>Cato Institute, Heritage Foundation and National
>>>Center for Policy Analysis, is heading the Club's
>>>Social Security Project. 
>>>
>>>"The emergence of the center-right phalanx backing the
>>>Social Security proposal is a major victory for the
>>>Cato Institute, a prominent libertarian group," The
>>>Washington Post's Thomas Edsall wrote recently. "In
>>>the late 1970s and early 1980s, Cato was almost alone
>>>in its willingness to challenge the legitimacy of the
>>>existing Social Security system, a politically
>>>sacrosanct retirement program. Recognizing the
>>>wariness of other conservatives to tackle Social
>>>Security, Cato in 1983 published an article calling
>>>for privatization of the system. The article argued
>>>that companies that stand to profit from privatization
>>>- 'the banks, insurance companies and other
>>>institutions that will gain' - had to be brought into
>>>alliance. Second, the article called for initiation of
>>>'guerrilla warfare against both the current Social
>>>Security system and the coalition that supports it.'" 
>>>
>>>Clearly, the "guerrilla warfare" has begun. And while
>>>it may seem like we're playing a GOP version of Six
>>>Degrees of Kevin Bacon, the stakes are high. The
>>>foundations of the U.S. system to ensure that average
>>>workers and their families are not left penniless, out
>>>in the cold is under serious attack. At SourceWatch
>>>we're tracking these innocent-enough sounding groups
>>>and what they are doing. And the best part is, you can
>>>help. SourceWatch is open to online citizens to add or
>>>edit any article in our collaborative database of
>>>people, groups and ideas shaping the public agenda. 
>>>
>>>The uncovering of the GOP plant Jeff Gannon (aka James
>>>Guckert) in the White House press room was the work of
>>>online citizen journalists, using their web research
>>>skills to expose the fake reporter and the White
>>>House's failure to explain truthfully how he got to
>>>ask the President a question. We do the same thing at
>>>SourceWatch, documenting the hidden connections
>>>between corporate trade associations, astroturf
>>>groups, and the White House. 
>>>
>>>Want to cover the newly minted website Generations
>>>Together? Or find out what impact Women for a Social
>>>Security Choice is having? How would you like to dig
>>>in and discover the common elements shared by Alliance
>>>for Retirement Prosperity and FreedomWorks? 
>>>
>>>So far, we've catalogued over two dozen articles on
>>>individuals and groups that are promoting Bush's
>>>Social Security privatization plan. There's plenty of
>>>groups and people to go around. To get involved, visit
>>>SourceWatch's "Welcome newcomers" page. On it you'll
>>>find tips for using a Wiki (SourceWatch runs on Wiki
>>>software), guidelines for writing SourceWatch articles
>>>and for research using the Web, plus advise from
>>>experienced SourceWatchers on how to research front
>>>group.
>>>
>>>http://www.prwatch.org/node/3310
>>>
>>>
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>>>   
>>>
>>>      
>>>
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